Davidson Kempner holds first close on latest distressed fund

The New York firm also has significant capital in two separate opportunistic commingled funds. 

Davidson Kempner Capital Management has held the first close for its distressed debt fund on $277.85 million, according to filings with the US Securities and Exchange Commission.

The Davidson Kempner Special Opportunities IV held a first close and is targeting $1 billion, the regulatory documents showed, to deploy into investments at the top of the capital structure.

The firm was not immediately available to comment.

SOF IV is targeting a net internal rate of return of 10-14 percent, according to documents from the San Diego City Employees’ Retirement Association as PDI reported in May. SDCERA allocated $50 million to the fund, as did Texas County and District Retirement System, according to PDI data.

While the fund may invest in North America, Europe, Asia and Australia, SOF IV is expected to focus on European bank portfolios, the documents showed. In some of the deals, Davidson Kempner might be the sole investor, and the firm focuses on investing in senior secured debt, particularly in real estate and other loans backed by assets.

The distressed fund will target eight to 10 deals, worth between $200 million and $500 million. Davidson Kempner’s hold size  will be between $75 million to $150 million. The vehicle charges a 0.5 percent management fee and carried interest of 15 percent with an 8 percent hurdle rate.

The New York-based investment firm’s previous distressed vehicle in the series, SOF III, launched in August 2015, had raised $1.1 billion in capital as of this February, documents from SDCERA showed. The Southern California public pension plan also committed $50 million to that fund.

The firm also raised $444.85 million for its Davidson Kempner Long-Term Distressed Opportunities Fund III, according to SEC filings,  a vehicle launched in 2014.